BM Khai­tan group plans to sell stake in Eveready

Scouts for strate­gic part­ner; shares jump 18% in­tra-day on sale talks

The Hindu Business Line - - NEWS -

The coun­try’s largest dry-cell bat­tery maker, Eveready In­dus­tries, has man­dated Ko­tak Mahin­dra Bank to scout for po­ten­tial fi­nan­cial or strate­gic in­vestors. The strate­gic sale is in­tended to de-lev­er­age pro­moter group hold­ing.

One of the old­est con­sumer brands, the ₹1,500- crore Eveready is the flag­ship com­pany of the BM Khai­tan fam­ily-con­trolled Wil­liamson Magor group. The group con­sists of McLeod Rus­sel (world’s largest tea planter), McNally Bharat and Kil­burn En­gi­neer­ing.

McLeod Rus­sel has also been di­vest­ing many of its tea estates in In­dia.

Ac­cord­ing to mar­ket sources, Eveready is open to both for­eign and do­mes­tic strate­gic in­vestors, as well as pri­vate eq­uity play­ers.

In fact, the com­pany could even look at hiv­ing off its bat­tery unit sep­a­rately, pro­vided it gets a good price.

The first op­tion will be to di­lute the pro­moter stake in favour of the in­vestor. But, all this de­pends on the val­u­a­tion. The pro­moter group (in­clud­ing the Khai­tan fam­ily) owns around 44 per cent stake in Eveready.

Wil­liamson Magor di­rectly holds 23.67 per cent in Eveready; and its unit Wil­liamson Fi­nan­cial Ser­vices Ltd has 8.79 per cent.

Eveready In­dus­tries MD Am­ri­tan­shu Khai­tan was not avail­able for com­ments.

Busi­ness val­u­a­tion

Mar­ket sources say re­cent val­u­a­tions of In­dian con­sumer brands have been to the tune of three to four times their turnover.

In this con­text, the Kha­tian fam­ily could ex­pect an en­ter­prise val­u­a­tion of around ₹4,000 crore-6,000 crore for Eveready, if not more.

On a stand­alone ba­sis, the bat­tery divi­sion is ex­pected to draw a val­u­a­tion of ₹3,000 crore. The bat­tery busi­ness — its main­stay ac­count­ing for ₹1,000 crore of the turnover — has seen flat sales over the last few years pri­mar­ily on ac­count of in­creas­ing Chi­nese im­ports.

How­ever, new norms stip­u­lated by the Bureau of In­dian stan­dards are ex­pected to boost bat­tery sales.

Of late, the man­age­ment of Eveready In­dus­tries has been try­ing to con­vert it­self into an FMCG com­pany by di­ver­si­fy­ing into new ar­eas such as elec­tri­cal prod­ucts, small ap­pli­ances and light­ing by fol­low­ing

Mar­ket sources said that Eveready is open to both for­eign and do­mes­tic strate­gic in­vestors, as well as pri­vate eq­uity play­ers

an “as­set-light” model. Sub­se­quently, the com­pany di­ver­si­fied into other busi­nesses like LED lights and small ap­pli­ances. These new ver­ti­cals are ex­pected to drive fu­ture growth of the com­pany.

Po­ten­tial in­vestors are said to be as­sess­ing the Eveready brand value apart from the strong distri­bu­tion net­work that the com­pany has built over the years.

Eveready, as a brand, was owned by the erst­while Union Car­bide In­dia since 1905.

The Khai­tans had fought a bit­ter bat­tle with Nusli Wa­dia’s Bom­bay Dye­ing to ac­quire Eveready for ₹300 crore in 1993.

De-lev­er­ag­ing bal­ance sheet

The com­pany cur­rently has a beaten down share price, which has more than halved in the past one year.

Sources aware of the de­vel­op­ment told Busi­nessLine that the com­pany has also been plan­ning to re­duce debt. The com­pany’s debt is said to be around ₹300 crore.

The high debt had often stopped Eveready from get­ting into new busi­nesses.

In a bid to re­duce the debt bur­den, the com­pany re­cently sold a land par­cel at Chen­nai for ₹100 crore. Talks are on for sell­ing an­other land par­cel in Hy­der­abad.

Stock surge

The mar­ket has re­acted pos­i­tively to re­ports of the pro­mot­ers bring­ing down their stake in the com­pany. Eveready shares closed at ₹205.20, up by 13.06 per cent, at the BSE, on Fri­day.

Dur­ing the day, Eveready shares saw a near 18-per cent jump to ₹214. Nearly, 3.01 lakh shares were traded on the BSE to­day.

Mean­while, shares of Wil­lam­son Magor & Co Ltd hit the up­per cir­cuit and closed at ₹63.60, up by 20 per cent, on the BSE.

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